Investing in the Cleantech Capital of the World

“We are looking into the best deals and we’ll take them step by step”

While China’s cleantech market has outshined its peers and attracted an eager investor base, the market has also presented unique challenges to investors: from navigating successful exits to developing a winning business model. What are the opportunities and strategies involved in investing in cleantech in China?

Industry leaders on the second panel of CEBEX Group’s 4th Annual Cleantech Investor Forum highlighted technologies that are poised for commercialization in the next year, emphasizing that maturization of the industry was a big topic of concern. Said Tony Chao, Associate Investment Manager at Applied Ventures, “You need ongoing technologies to sustain industries. We are seeing things reach a maturity stage.”

The numbers point to a bright future for cleantech investments. Calvin Xu, Executive Director of Asia Environmental Partners at Olympus Capital, explained that his firm has made over 40 investments, worth 3 billion dollars, in the last 14 years. In addition to an RMB fund, Xu acknowledged that Olympus Capital has “about 100 million USD” to invest in cleantech this year. He explains: “the supply chain player who can competently feed into this market has very good investing prospects.”

Said Henrik Dalsgard, Managing Director of Camco China, a firm which has invested approximately 100 RMB in cleantech and has about 10 million dollars to invest this year: “We are looking into the best deals and we’ll take them step by step.” In picking the kinds of companies to work with, Dalsgard emphasized previous knowledge of the industry: “We know the areas where there is a lot of potential for co-investing. That’s where we come in.”

Xiao Zhang, Executive Vice President of Shenzhen Co-Win Venture Capital Investment, stated that his firm invests by “paying close attention to the industry sectors.” To make sure the companies it selects can be successful, the organization helps them both on the upstream supplier sector and on the downstream selling sector. In evaluating companies for investment, a big criterion is whether the companies have a good chance for long-term survival: “We locate assets in the key value driven sections in this entire industry chain.” While the current state is still heavily focused on high-end manufacturing, Zhang emphasized that his firm would like to see business innovations that are directed at the service sector. The firm is also looking closely at “special sectors,” including city mining and city waste.

Panelists agreed that after selecting the company, the real work has just begun. “The second part is innovation,” said Xu. Applying the use of technology and practices is a big step forward. Currently, “The government spending in this is really giving a big boost to the domestic creation of new ideas,” which is keeping China a couple of steps ahead of its competitors.

Moderator Tahn-Joo Chin, Managing Director of Hina Group, summarized the other panelists’ points: while there are various opportunities, one should look into different components and methods of instrumentation, as well as the potential of adding to existing service sectors. Chin also emphasized the importance of continued innovations, and the necessity of adapting new technologies to the Chinese market.